Cash Back Credit Cards

Types of Cash Back Credit Cards

Not all credit cards are created equal. Some cards offer straight cash back on all purchases, while others offer a tiered earning plan based on the total amount of the cardholder’s purchases. Another variation offered is a card that is partnered with particular merchants or businesses where cardholders earn a different percentage of cash back based on where they use the card.

All of these variations are enticing, and all of them offer cardholders in good standing the ability to earn cash on their purchases rather than accumulating other rewards they may not be interested in. Understanding the benefits of these cards can help applicants choose which card is best for their spending needs.

Benefits of Cash Back Cards

The most obvious benefit of cash back cards is that cardholders actually earn money – not redeemable miles, points, or gifts – for every purchase they make. While the credit card company may offer additional incentives for cardholders to redeem their earnings in specific ways, the allure of getting cash back simply for spending money attracts many interested consumers.

Cash back cards also have other benefits. Because the reward is actual money, consumers have much more flexibility about how they redeem their rewards. Many cards even let the accumulated reward be deposited into the current balance, helping with a monthly payment. Cash back cards are also less inclined to change their offers based on external factors; many airline mile cards, for example, have recently considered changing the reward requirements for redeeming miles because of rising fuel prices. Cash back credit cards do not usually need to adjust their rewards structure as frequently as other cards.

Choosing the Best Cash Back Offer

Cash is cash, right? Not when it comes to cash back cards. Terms and conditions vary, both for using the credit card as well as reward accumulation. Before applying for a card, interested consumers should investigate:

• Interest Rates: Many of these cards have higher interest rates than other reward cards, and if the cardholder routinely carries a month-to-month balance on the card any cash back rewards will be quickly lost to finance charges.
• Tier Levels: Some cards offer reward earnings at different levels based on the total spent on the card. While an offer of 5 percent may be appealing, the fine print may reveal that the higher tier only applies when the accumulated purchases rise above a certain monetary amount.
• Introductory Earning Rates: An initial reward rate of 5 percent may be attractive, but further investigation may prove that after a brief introductory period (usually 3-12 months) the earning rate may drop drastically.
• Reward Expirations: Some companies require cardholders to redeem their balance within a certain period of time or it may be subject to administrative fees or be forfeited altogether.
• Reward Limits: Cards offering higher percentages of cash back often include limits on how much one cardholder can earn each year.
• Merchant Partner Rates: Many cards offer better earning rates based on where consumers shop. Cardholders who regularly frequent those businesses would benefit from a more specialized card, but consumers who don’t normally shop with the card’s partner merchants may not be able to take advantage of the card’s full earning potential.

In addition to investigating the specifics of the reward plan, potential cardholders should investigate all the card’s terms and conditions before applying, including overall interest rate, late payment penalties, grace periods, fraud protection, and card security. Even the most attractive cash back offer may not outweigh strict terms and unfavorable conditions.

Redeeming Cash Rewards

There are many ways to redeem accumulated cash from credit cards. The specific methods vary for each company, but consumers often have their choice of:

• Applying the amount earned directly to the card’s balance.
• Transferring funds electronically to a bank account.
• Requesting a check to be mailed.
• Choosing a gift card from a partner merchant.

Before attempting to redeem cash rewards, cardholders must also investigate minimum redemption amounts since many cards require that a certain amount be earned before it can be redeemed. As a bonus for accumulating higher rewards, cardholders may be eligible for additional incentives and better rewards if they do not redeem the minimum as soon as it is accumulated.

Maximize Rewards

To maximize cash back rewards, consumers can try these tips:

• Have household utilities (cable, phone, electricity, etc.) applied directly to a cash back card each month.
• Choose a specific card that offers greater rewards for your shopping habits, such as partnering with your favorite stores or gas stations.
• Consolidate accounts with a spouse to ensure you earn the maximum amount of rewards and progress to higher earning tiers more quickly.

Popular Cash Back Cards

Some of the most popular cash back card offers are from:

• Discover Card
• AMEX Simply Cash
• Chase Freedom Visa Card
• Capital One No Hassle Cash Rewards Card
• Disney Credit Card

Interested consumers should thoroughly investigate the specifics of different credit cards before applying. More information and updated offer comparisons can be found online at [http:www.creditcards.com/cash-back.php CreditCards.com].

Reward Card Cautions

Utilizing a credit card that offers a cash back bonus on every purchase can be a great way to earn generous rewards that you can actually use. A cash back reward can be much more versatile and practical than some of the other credit card reward programs available. Many cardholders enjoy the feature and consider the reward as a type of discount on purchases.

If you have a cash reward credit card – or you are considering obtaining one – you should keep in mind that even though you earn cash on your purchases you still need to watch your spending and take care to not get carried away in pursuit of more rewards. Credit card companies understand the mentality of some cardholders, and they also understand that a generous rewards program can prompt certain people to spend money they may have not spent otherwise. Consider the cash rewards as a mere bonus for using the card, but do not fall into the habit of using the card in a concerted effort to earn more cash back. Cash back cards used in this manner often wind up with huge balances and substantial monthly payments.